Forum > Lender Questions > Does the lender receive an interest? Forum Guidelines

  • Lissa Gracia
    Neterlands Antilles

    Apr 18, 2018

    What is the point of lending if you don't receive interest on the money you lend people while the service fee is 5%?

    Christian Golo and Su Rono like this.
    • Director
      United States

      Apr 19, 2018

      Hi Lissa,

      Lenders do not receive interest at Zidisha. We're a philanthropic platform, and the point of lending is to help entrepreneurs access resources to improve their lives and that of their families/communities, while connecting with them and learning about life in other parts of the world.

      The 5% service fee covers the cost to Zidisha of administering the loans: money transfer fees, SMS and email messaging costs, web hosting, etc. A portion of the fee is also returned to donation lending accounts to help the loan funds compound and increase in value, enabling more loans to be funded in the future.

      • Volunteer Mentor
        Christian Golo
        Accra, Ghana

        Apr 19, 2018

        Director Julia, I' m always grateful and thankful to you for the great relief /liberation your hard work and dedication brought to some of us.
        I pray with you that God bless you with good health and long live.
        I also admire and love your explanation

        Laurie, Fitri Fauziyah and Julie like this.
    • Country Liaison
      United States

      Apr 19, 2018

      Lissa, the point is to care about others (the borrowers), ahead of ourselves (the lenders). Zidisha is not a place for lenders to make money. Rather, it is a place to help a few of our fellow human beings to survive - for many Zidisha borrowers, it is literally that...

    • Joshi
      United States

      Apr 20, 2018

      Hello Lissa,
      if you are looking to earn interest, keep your money in a traditional bank.

      Instead of interest if you want to have the intangible, invaluable satisfaction of actually making a difference in someone's life, lend your money here - over and over and over. I would strongly encourage you to see how a modest sum like $50 or $100 will make dramatic difference in people's lives. Bank will give you compound interest. Here, you can experience the magic of 'compound lending'!! People that you can communicate with, see pictures of, ask questions to, see getting ahead in life. Sometimes with zidisha funds being their only hope.

      If you are interested, I can readily point 3 loans right now that have great repayment rate - 100% - and can really use any funds that you can provide.

      • Volunteer Mentor
        John Thiaro
        Nakuru, Kenya

        Apr 20, 2018

        I am a beneficiary of the Zidisha loans and my life has completely made a 180 degrees turn!

        I started with a low amount of Zidisha loans which has been helping me expand a little at a time. my family's cohesion is pegged on my business which has heavily relied on Zidisha lending.

        As we speak, am on a totally another level than I would have imagined 5 years ago.

        My take is that the little amount that Zidisha charges at 5% is merely enough to run the day to day activities of this great organization called ZIDISHA!

        Laurie, Christian Golo, Julie and Joost like this.
    • Julie
      Free-attle, United States

      Apr 21, 2018

      The service fee is paid by the BORROWER, not the lender. Is that what you're asking?

      Fitri Fauziyah and Alex Tsuma like this.
      • Country Liaison
        United States

        Apr 27, 2018

        I think maybe Lissa meant--(correct me if I'm wrong, Lissa)--that she was wondering why some of the 5% Service Fee that borrowers pay to Zidisha for operating costs is not used to pay interest to lenders on the amounts they lent.

        Years ago, Zidisha did used to pay interest to lenders. The way it worked was that each lender could select an interest rate (from 0% to 15%, if memory serves) to charge on the portion he/she contributed toward funding the loan for the borrower, at the time he/she made the funding contribution.

        So, that meant that the borrower had to pay back more, to cover the interest charges that got paid back to whichever lenders chose to charge interest.

        Lenders' ability to charge interest to borrowers was removed in 2015. I was glad to see that happen...

        Here's some history, from Zidisha's older public forum, from soon after lenders' ability to charge interest was removed:

        [...threads/interest-does-not-increase-financial-returns.1945/] [2015-02-18]

        And about the "Loan-Loss-Reserve Fund", its name change to the "Members Loan Fund", and why the Director made that change:
        [...threads/zidisha-members-loan-fund.2258/ ]
        [2015-05-08] (If memory serves, the MLF amount charged at that time was only a very small amount. As of earlier this month, the MLF fee no longer exists. It has been replaced by a refundable Credit-Risk Fee: [thread 1899])

        When lenders here were allowed to charge interest, I always chose to charge 0% because I understand that many, many, many Zidisha borrowers experience quite a lot of hardship... and I believe that anyone with more means never should intentionally make a vulnerable person's life any more difficult than it already is. Rather, to the extent that we can do so, we should be trying to ease their burdens rather than adding to them.

        IMO, the question that Zidisha lenders should ask is this: Would we really need the tiny amount of money that interest would pay us on the micro-loans we've extended to borrowers, more than some of them would need that amount literally to survive? In most cases, I think the answer is "no" and that is why I never charged any interest to any Zidisha borrowers, and was happy to see the option to charge interest removed.

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